Correlation Between News Corp and AES Corp

Can any of the company-specific risk be diversified away by investing in both News Corp and AES Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining News Corp and AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between News Corp Cl and AES Corp, you can compare the effects of market volatilities on News Corp and AES Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in News Corp with a short position of AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of News Corp and AES Corp.

Diversification Opportunities for News Corp and AES Corp

-0.77

Correlation Coefficient

News Corp  AES Corp

Pay attention - limited upside

The 3 months correlation between News and AES is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding News Corp Cl and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and News Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on News Corp Cl are associated (or correlated) with AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of News Corp i.e., News Corp and AES Corp go up and down completely randomly.

Pair Corralation between News Corp and AES Corp

Assuming the 90 days trading horizon News Corp Cl is expected to under-perform the AES Corp. But the stock apears to be less risky and, when comparing its historical volatility, News Corp Cl is 2.11 times less risky than AES Corp. The stock trades about -0.02 of its potential returns per unit of risk. The AES Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,251  in AES Corp on December 26, 2024 and sell it today you would lose (2.00) from holding AES Corp or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

News Corp Cl  vs.  AES Corp

News Corp Cl

Risk-Adjusted Performance

Very Weak

Over the last 90 days News Corp Cl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, News Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AES Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AES Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AES Corp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with News Corp and AES Corp

The main advantage of trading using opposite News Corp and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News Corp position performs unexpectedly, AES Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AES Corp will offset losses from the drop in AES Corp's long position.

The idea behind News Corp Cl and AES Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.